Dycus v. Belco Industries, Inc.

569 P.2d 553
CourtCourt of Civil Appeals of Oklahoma
DecidedSeptember 15, 1977
Docket48834
StatusPublished
Cited by10 cases

This text of 569 P.2d 553 (Dycus v. Belco Industries, Inc.) is published on Counsel Stack Legal Research, covering Court of Civil Appeals of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dycus v. Belco Industries, Inc., 569 P.2d 553 (Okla. Ct. App. 1977).

Opinion

BRIGHTMIRE, Presiding Judge.

The general partner of a limited partnership sold all of its assets, retained all the proceeds and proceeded with dissolution of the entity. The limited partner requested an accounting and damages. The trial court awarded the limited partner damages. From that judgment both parties appeal.

I

The partnership, defendant Coronado Inn, Ltd., vías formed in 1965 primarily for the purpose of purchasing, refurbishing, and operating a financially faltering downtown Norman, Oklahoma hotel called the Coronado Inn. Initially there were eleven limited partners and one general partner. Included among the limited partners were plaintiff Donald Dycus and defendant Belco Industries, Inc. (Belco). A few months after the company’s creation, the original general partner resigned and transferred his interest and position to Belco. At various times over the years several limited partners assigned their interests to Belco, so that at the time of dissolution, there remained but one limited partner interest outstanding, that owned by Dycus.

During its seven-year life, the partnership business suffered from financial anemia. The hotel’s propensity for losing money was so great that by 1972 general partner Belco had loaned the partnership more *555 than $241,000 simply to keep the operation alive.

In April 1972 Belco granted an option to purchase the hotel to one Earl Pedigo. Pe-digo exercised the option and, without notice to or consent of Dycus, the disputed sale was consummated in December of that year. Belco decided that the sale proceeds should be paid to partnership creditors, and deeming itself to be such a creditor, it paid a large part of the money to itself in satisfaction of its operational advances. Dycus received nothing.

II

May 22, 1973, Dycus filed this action against Belco and, by later amendment, against the partnership itself asking for an accounting and either for cancellation of the sale or alternatively for damages of $150,000 because of Belco’s “unauthorized acts.”

Defendants answered by general denial and cross-petitioned for judgment against plaintiff in the amount of $9,500, an amount they claim plaintiff owes because plaintiff had earlier failed to pay additional capital upon general partner Belco’s request, as authorized by the partnership’s organic agreements.

Plaintiff denied liability on the debt and countered with allegations of capital contributions totaling $21,600.95, all of which he wanted returned.

After a somewhat arduous and prolific course of pretrial pleading, the case was tried to the court January 21, 1975. Following the submission of more briefs judgment was entered for plaintiff July 9, 1975, in the amount of $9,180.99 plus costs and a $3,000 attorney’s fee.

Belco assails the trial court for (1) failing to find that plaintiff had abandoned his partnership interest, (2) finding that repayment of plaintiff’s capital contribution takes precedence over repayment of Belco’s loans, (3) failure to grant defendants judgment on their cross-petition, and (4) awarding plaintiff an excessive judgment.

Plaintiff on the other hand contends that the amount of both the damages and awards are insufficient.

III

Defendants argue first of all that Dycus is not entitled to an accounting-because he, at some point during the seven years, abandoned his partnership interest. They point to, among other things, plaintiff’s refusal to honor Belco’s 1969 call for contribution of additional capital and to his silence of several months in 1972 during the period between Belco’s granting of the salé option and the sale’s consummation. Defendants also claim plaintiff’s lack of interest is evidenced by his execution in 1967 of a consent to sale of the hotél in a transaction wholly unrelated to the one involved here and one which was never carried out.

To abandon one’s property is to relinquish, or give up all ownership interest in it. How this is accomplished with regard to the ownership of shares in a limited partnership other than by written transfer is not explained by defendants. Certain it is that failure to respond to a contribution call, or remaining aloof from partnership affairs, or doing any other thing which demonstrates a lack of interest in or concern for the entity cannot provide the foundation for a finding that the owner of the interest has thereby somehow divested himself of it. By its very nature a limited partner’s role is a passive one and requires no participation in management of the partnership — a characteristic which justifies the limitation on liability. Indeed, by statute a limited partner must remain inactive or run the risk of incurring general partnership liability. 54 O.S.1971 § 148.

We hold plaintiff did not abandon his interest in the enterprise.

IV

Next defendants contend Belco’s loans should be repaid prior to any return of capital contributions to limited partners. Their theory is premised on provisions of the articles of limited partnership which state that any “advances” by either limited *556 or general partners are to be deemed loans to and debts of the partnership and further that upon dissolution the partnership is first to repay all debts. This means, according to defendants, that since Dycus made no advances, Belco’s loans must be repaid ahead of any return to plaintiff of his capital contributions.

This reasoning is unsound. The contractual terms relied upon by Belco directly conflict with the provisions of Oklahoma’s Uniform Limited Partnership Act, 54 O.S. 1971 §§ 141-171. According to § 164 of the Act, entitled “Order of payment of liabilities on dissolution,” first priority belongs to creditors other than “limited partners on account of their contributions, and . general partners.” Next in line are the limited partners for repayment of their proportionate shares of any profits and return of their contributions. Then follows re-coupment by general partners.

This priority conflict between the partnership articles and the statute is resolved by 15 O.S.1971 § 211 which pronounces illegal all contracts “[cjontrary to the policy of express law, though not expressly prohibited . . . .” Any contracts or portions thereof in derogation of our statutes will not be enforced by courts of this state. Walker v. W. T. Rawleigh Co., 133 Okl. 75, 271 P. 166 (1928). And contractual illegality must be inquired into on appeal whether raised by the parties or not. Sigmon Furniture Mfg. Co. v. Massey, 192 Okl. 436, 137 P.2d 793 (1943).

We hold, then that Belco’s claim for advances must take a statutory place behind creditors and limited partners. As to money paid as capital contributions, however, one who is both limited and general partner is subject to all restrictions of a general partner except in respect to his limited partner contribution. 54 O.S.1971 § 153. Therefore, Belco is entitled to repayment on a parity with plaintiff to the extent of the qualifying portion of its limited partner contribution.

V

We turn now to the problem of determining the proper amount of money due plaintiff.

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Bluebook (online)
569 P.2d 553, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dycus-v-belco-industries-inc-oklacivapp-1977.